Monday, May 6, 2013

We Are One Illinois Union Coalition Reaches Pension Agreement with Senate President John Cullerton

The We Are One Illinois Labor coalition announced an agreement has been
reached on pension legislation with State Senate President John Cullerton. [According to the We Are One Coalition], the agreement, which will be part of Senate Bill
2404, is a "constitutional alternative" to House Speaker Michael
Madigan's Senate Bill 1, which was passed by the Illinois House last week and
is waiting for a vote in the Illinois Senate. Senate Bill 1 is unconstitutional and unfair to the employees and retirees in the affected state
pension systems.

The following statement from Michael T. Carrigan, president of the Illinois AFL-CIO, on
behalf of the We Are One Illinois coalition:

"The union coalition has made
a great effort to ensure fairness for the public employees and retirees who did
not cause this problem, to ensure the stability of the pension systems for
future generations, and to offer a credible way forward. This agreement is our
coalition's bottom line.

"We continue to strongly
oppose Speaker Madigan's mega-bill, SB 1, which threatens to rob the retirement
savings of teachers, police officers, and others in public service, by 20-40
percent. His proposal is not only drastically unfair, but it is blatantly
unconstitutional, rendering any advertised savings fictional.

"We urge lawmakers from both
parties in both chambers to embrace the agreed bill and oppose Senate Bill 1." The coalition also released the
following details about SB 2404:

1. Include an ironclad pension
funding guarantee to ensure that the state cannot skip or short payments to the
state’s retirement systems. This fixes the fundamental, chronic problem of
state underfunding and ensures that future legislatures and governors can never
again engage in the type of fiscal negligence that led to today’s pension
funding problem.

2. Dedicate state revenues to a
Pension Stabilization Fund to make supplemental payments on top of the state’s
required contribution. This major financial commitment will strengthen the
retirement systems’ solvency.

3. Establish three choices for
employees in Tier I: a) Move from a 3% compounded to a 3% simple COLA with a two-year delay. Employees choosing
this option would 1) receive guaranteed access to health care in retirement; 2) ensure
that all future salary increases count toward their pensions; 3) have the option
to enroll in a cash balance plan (on top of their defined-benefit
pension); and 4) for TRS participants, continued eligibility for the TRS
ERO.b) Choose to keep the 3% compounded COLA, but with a three-year delay before
the COLA would take effect. These employees would also pay 2% more of
their salary into the pension system. Employees choosing this option would
receive guaranteed access to health care in retirement and ensure that all
future salary increases count toward their pensions.c) Choose to keep the 3% compounded COLA exactly as it is. These employees
would not have guaranteed access to health care in retirement and would
forgo any future salary increases counting toward their pensions.

4.Establish a choice for current
retirees and those set to retire as of January 1, 2013:a) Retirees could choose to keep their guaranteed access to health care and
keep their 3% compounded COLA, but would agree to a two-year COLA freeze. The
freeze would occur in non-consecutive years.b) Alternatively, retirees could choose to keep their 3% compounded COLA
without any freeze, but forgo guaranteed access to health care in retirement.

The agreement is structured as a choice proposal, for which Senate
President Cullerton has consistently advocated. The legislation impacts
those in the Teachers’ Retirement System (TRS), the State Universities
Retirement System (SURS), the State Employees’ Retirement System (SERS), and
the General Assembly Retirement System (GARS). The proposal does not
impact the Judges Retirement System (JRS).

Choice: Affecting Tier I Actives

Choice
A: Lower COLA

Choice
B: Keep Your COLA

ØAgree to 3% simple COLA with a 2 yr. delay

ØReceive retiree healthcare access

ØEnrollment in optional cash balance plan on
a pre-tax basis by making an irrevocable election to join plan after
choosing Choice A

ØEligibility for ERO (TRS only)

Option 1:

ØNo change to 3% compounded COLA

ØNo retiree healthcare access

ØFuture salary increases offered as non-pensionable

Option 2:

ØNo change to 3% compounded COLA

ØReceive retiree healthcare access as
consideration

In exchange for:

ØA 3 year delay in 3% compounded COLA

ØPaying an additional 2% in employee
contribution over two years

Choice: Affecting Current Retirees (and Tier
I Actives Already Set to Retire as of 1/1/2013)

Choice
A

Choice
B

ØNo change to 3% compounded COLA, except
that COLA is subject to a staggered two-year freeze

ØReceive retiree healthcare access

ØNo change to 3% compounded COLA

ØNo retiree health care access

Other Items in
the Legislation:

Collective Bargaining: Prohibits mandatory bargaining over the
benefit changes and employee contribution increases in the bill.

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